The problem is that the tendency of state capitalism is to increasing levels of stagnation, with larger and larger deficits required to prevent depression. Even in the upswing phase of the business cycle, the U.S. government must run deficits that are enormous by historical standards. And this means snowballing government debt as well. If balanced budgets were the rule, the economy would go into a chronic state of depression — something that almost happened in the Great Depression, but was averted by the permanent war economy that emerged around 1940. If the government debt was paid off, the trillions in capital dumped back into the economy would drive the rate of profit down to catastrophic levels.

Of course this is unsustainable, necessary or not. As deficits grow larger and interest on accumulated debt grows as a share of the government’s budget, we approach a tipping point at which a fiscal train wreck becomes unavoidable.